Air India has ambitious fleet growth plans, but must wait for its privatization process to play out so any potential new owners can review the airline’s strategy, according to a senior executive.

The carrier has not inducted new aircraft in the past few years, but has drafted a plan to add more aircraft, said Purnima Nerukar, Air India general manager for commercial strategy and planning, at the World Routes conference in Adelaide.

The carrier intends to grow its fleet to more than 250 in the next five years. It currently operates 115 aircraft, with another 13 stored and 25 with subsidiary Air India Express, according to the Aviation Week fleet database.

While Air India has not been growing its fleet, its rivals in the Indian market have been expanding quickly. Air India also has to grow to meet demand, but it will wait for any potential new owner to review the plan before finalizing it, Nerukar said. The airline intends to add widebodies and narrowbodies. Some network plans are also on hold until the sale process is completed.

In the meantime, the carrier is adding some routes by increasing utilization of its current fleet. It has launched 23 new domestic flights and six additional international services since January. It will launch a route from Delhi to Toronto Sept. 27 and also plans to add service to Nairobi.

The Indian government owns 100% of Air India, but aims to sell off its stake in the airline. The government is expected to issue a call for expressions of interest soon.

To aid this process, the government transferred half of Air India’s $8 billion debt into a special entity it established for this purpose. As part of this process, Air India had to transfer its investment in some of its subsidiaries to the government and is also issuing government-backed bonds to finance the debt. The first stage of this bond offer was significantly oversubscribed.

Air India “has been carrying the legacy of an accumulated debt over the past few years,” Nerukar said. This has hurt net results, although operational results have generally been more positive.

Air India achieved a healthy operating profit in its 2017-18 fiscal year, and was poised to make another profit in the 2018-2019 year, Nerukar said. But the airline slipped to an operating loss for that year because of external factors such as the closure of Pakistan’s airspace and fuel and exchange rate fluctuations. The carrier’s financial year extends through March 31.

The airline had a small operating loss for the first quarter of the current fiscal year, although it is expecting a return to operating profit for the full year, Nerukar said. Dynamics such as the exit of rival Jet Airways has led to a “fairly stable market environment.”  

The bankruptcy and grounding of Jet Airways earlier this year “was not a happy moment for the Indian airline industry,” Nerukar said. However, after the initial shock, the Indian airline industry has absorbed the capacity loss very well, she said.

Air India and its rivals “rose to the occasion in filling the gap,” Nerukar said. Overall domestic capacity has grown beyond what it was before the Jet collapse, and international capacity has almost reached previous levels. There is still “a little bit of a vacuum” in long-haul international service.

Overall, there are 570 aircraft flying in India in the last fiscal year, and there is expected to be 620 by the end of the current fiscal year, Nerukar said.

Congestion at the major hubs remains an issue in India. Nerukar noted there are 63 airlines serving Delhi, after 10 more were added this year. There are more than 50 airlines operating to Mumbai, up by five this year.

Growth at secondary airports is taking some of the strain off the primary hubs. More local airlines are parking aircraft at secondary airports overnight, meaning more service for these airports, Nerukar said.

The temporary closure of Pakistan’s airspace caused major headaches for Air India earlier this year. The carrier had to reshuffle its operations on many long-haul flights to the US and elsewhere to cope with this, Nerukar said. Some nonstop flights were switched to one-stop via Vienna, which doubled the crew requirement. The carrier had to absorb $50 million in additional costs in the first quarter due to these airspace-related changes.

Adrian Schofield/Aviation Daily, Adrian.schofield@informa.com